Debt investments refer to financial instruments where an investor lends money to an entity (corporation, government, or institution) in exchange for periodic interest payments and the repayment of the principal amount at maturity. These include:
Government bonds (such as U.S. Treasury bonds, municipal bonds, and sovereign bonds)
Corporate bonds
Certificates of deposit (CDs)
Commercial paper
A. Investments in the capital stock of a corporation → Incorrect. Capital stock represents ownership (equity investments), not debt investments.
C. Contents of an investment portfolio → Incorrect. A portfolio may contain both equity and debt investments, making this too broad to classify specifically as debt.
D. Acquisition of common stock of a corporation → Incorrect. Common stock is an equity investment, not a debt investment.
The IIA’s Global Internal Audit Standards on Investment Management and Risk Assessment highlight debt instruments as fixed-income securities.
International Financial Reporting Standards (IFRS 9 – Financial Instruments) classify bonds and loans as debt investments, distinct from equity instruments.
The Generally Accepted Accounting Principles (GAAP) – FASB ASC 320 specifies how to account for debt securities.
Explanation of the Other Options:IIA References & Best Practices:Thus, the correct answer is B. Acquisition of government bonds.
